The battle for 88.1 FM

Sean Silcoff and research by Steve Kupferman

The Globe and Mail

Last updated Thursday, Sep. 06 2012, 12:51 PM EDT

What’s that, you say? Radio is a dying medium? Just another victim of the digital revolution, your iPod, an entire generation’s waning attention? Listen up: Radio has survived worse. It has endured television, Walkmans, the Internet, satellites, Stern, CanCon and even smooth jazz. Since 1998, when Canada’s broadcast regulator set rules on how many stations a company could own in a market, industry profits have marched ever upward—even as overall listenership has declined. Radio, it seems, is still a great business. Especially in Toronto, Canada’s biggest market, which accounts for more than a quarter of industry profits. And so when a fresh frequency comes up for auction, it’s a big deal. Bigger yet when the Big Four *—Astral, Corus, BCE and Rogers—are forced to watch from the sidelines. ** Which of the 20-odd applicants will be the newest occupant of 88.1 on Toronto’s FM dial and what, exactly, will they do with it once they get it? Stay tuned.

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* Yikes! Make that Big Three: BCE bought Astral Media in March

** Because no one company is permitted to own more than two FM stations in a market

WHERE DID 88.1FM COME FROM? For almost three decades, Ryerson University radio station CKLN at 88.1 FM was a beacon for campus radicals and musical outsiders (it hosted the nation’s first all-hip-hop show in 1984), before it was riven by bitter internal politics, and financial and administrative strife. Last year, the Canadian Radio-television and Telecommunications Commission stripped the station of its licence for repeatedly failing to comply with federal regulations. CKLN is bidding to get the licence back, but it’s got stiff competition: 27 groups applied for it last year, and 22 made the first cut in March, many of them private interests that want to crank up the station’s commercial potential.

THE CONTENDERS FOR 88.1FM

Evanov Communications Bill Evanov, a former manager at Canadian ethnic radio pioneer CHIN, heads an eclectic up-and-coming radio group featuring a multilingual AM station in the Toronto area, a string of contemporary easy-listening stations (known as “The Jewel”) in Winnipeg and Ontario, and his big money-maker, Toronto dance station Z103.5. But his claim to fame is Proud-FM, the world’s first commercial radio station that caters to gay listeners. Evanov won the licence for Proud in 2006 and forecast it would generate $2.9 million in revenues by year seven. But Proud has fallen well short because much of its target audience can’t get a good signal at its 103.9 FM frequency, even steps away from the station’s home in Toronto’s gay village. The reason: signal adjacencies. Proud and Z103.5 are such close neighbours on the dial that they risk interfering with each other. So Proud’s downtown transmission has been limited to an anemic 50 watts—too weak to penetrate downtown buildings. A move to 88.1 FM “should entirely eliminate any penetration problems this signal currently experiences,” the company says.

Torres Media When pitching the market’s first all-blues radio station, it can’t hurt to have original Blues Brother Dan Aykroyd plead your case before the CRTC. That’s what Ed and Frank Torres did to secure the licence for Ottawa station DAWG-FM, which went live in June, 2010. It has since carved out a small but loyal following that skews middle age, high-income and male. With a larger blues community in Toronto, the 40-something Torres brothers hope to repeat the success and build on their legend. Trained pilots by trade, the duo began with a Markham-based banner-flying company in 1991. The Torreses eventually expanded into broadcasting, selling airborne traffic reports to radio stations across Canada, and later adding news and music programming to their syndicated offerings. By the mid-2000s, they had all the infrastructure of a radio station, without an actual station. They settled on a blues format after surveys indicated everyone liked the style, even if it wasn’t their own favourite. “So we thought, ‘Well, we’re not going to be a number one station,’ ” says Ed, “but if we can appeal to a great number of people on the second and third choice, we can be profitable.”

MZ Media Citytv pioneer Moses Znaimer’s retirement project involves running a niche media company that appeals to his own demographic of aging boomers. His MZ Media owns a magazine (Zoomer), an FM station (The New Classical 96.3) and an AM station (Zoomer Radio 740), which appeals to the seniors crowd with a mix of old radio dramas, car care and gardening shows, and golden-oldie programs like the Saturday Sinatra hour. But Zoomer Radio has two problems: bad reception that results in poor sound quality—the last thing the hard-of-hearing need—and a lease at the CBC’s transmission tower that expires in 2021. Znaimer is pitching to move Zoomer to 88.1 FM, securing the station’s future while having minimal impact on the market—a play to the CRTC’s stated desire to keep the radio industry financially strong.

Newfoundland Capital With $127 million in 2011 revenues, Newcap, controlled by East Coast business legend Harry Steele, is the biggest cat in the hunt for 88.1 FM. Over the past decade, Newcap has been building its radio holdings, and now has 83 licences, up from just 14 in 1999. Its Toronto bid targets a niche demographic—busy urban females, age 25 to 44—with an up-and-coming format that plays AAA-type music, minus the tougher edges and with a focus on singer-songwriters. Think Adele, Norah Jones and Bon Iver, or, as Newcap wrote in its application, “the type of music you would hear in Starbucks or Second Cup.” Bland? Perhaps, but as part of its application, Newcap is offering up $12 million to help develop Canadian talent, a rich sum for a new licence application. So rich that Newcap capitalized it in its proposal: TWELVE MILLION DOLLARS.

Mike Wekerle Perhaps the most intri-guing name in the running for 88.1 is the high-octane, tattoo-covered widowed father of five, formerly known as the best trader on Bay Street. “Wek” left long-time employer GMP Securities in August, 2011, briefly teamed up with Toronto fund manager Galileo Global Equity Advisors, and has been dabbling as an investor in Florida real estate media; he owns 10% of fellow bidder Newfoundland Capital’s Class A stock. Now, he’s hoping to win a licence for New FM, an Adult Album Alternative format that will play the likes of Feist and Kathleen Edwards, Canadian critical darlings who get short shrift on mainstream radio. In fact, Wek pledges to amp up the Canadian content to 45% of music played and devote 50% to emerging artists, with a playlist of 1,500 songs, more than twice the size of a typical hot adult-contemporary station. Wek has at least $10 million to sink into the new venture, but his recent split from Galileo leaves things unclear: He was supposed to run Galileo’s media and technology fund and fold in partial ownership of the new station.

Editor’s note: An earlier online version of this story incorrectly implied that Ryerson University owned and operated CKLN. This version has been corrected.